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Marcus Johnson: Hey, gang, it's Monday, August 17th. Danny and listeners, welcome to Mind the Numbers, the e-market podcast made possible by Awin. I'm Marcus. Joining me for today's conversation we have senior editor, calling New York home, it's Daniel [00:01:00]

Daniel Konstantinovic: Konstantinovic. Hello. Happy to be here.

Marcus Johnson: Hey, fella. Thank you for joining me.

Marcus Johnson: Today's fact.

Marcus Johnson: So Danny, fewer than 100 people in the world have highly superior autobiographical memory or

Marcus Johnson: HSAM. Um, these folks, these fewer than 100 people on the planet, these folks can perfectly remember almost every calendar date of their lives, recalling the exact weather, what they wore- Hmm ... what news happened on a random Tuesday 20 years ago, uh, all of these things. Um, so memory champions rely on mnemonic devices, memory palaces, things like that, whereas people with, uh, HSM, uh, HSAM have memories that are encoded subconsciously and replay in their minds like movies.

Daniel Konstantinovic: Sounds terrible. Uh

Marcus Johnson: Would you, would you not want this?

Daniel Konstantinovic: No, definitely not. I mean, I already have moments where, you know, you say something embarrassing, and then you think about it every night for the next eight [00:02:00] years-

Marcus Johnson: Oh, that's a

Daniel Konstantinovic: good point. Yeah ... and go, "Ooh," and like cringe. Imagine if you could remember every single one-

Daniel Konstantinovic: in perfect detail.

Marcus Johnson: It's true.

Daniel Konstantinovic: That would be terrible. It's

Marcus Johnson: torture. And you get, you ge- you get that, but none of, uh, this helps you with test stuff. So their superior memory is limited to autobiographical experiences. They don't have a generalized perfect memory for abstract data or school subjects. So testing actually shows their short-term memorization of random word lists or phone numbers is completely- Hmm

Marcus Johnson: average, unfortunately. Yeah.

Daniel Konstantinovic: Sounds like a prison.

Marcus Johnson: Yeah.

Daniel Konstantinovic: Not good. Not good. Sorry to those 100 people. If you're listening, w- write in.

Marcus Johnson: They will be. Probably not. Anyway, today's real topic

Marcus Johnson: The big three questions surrounding Spotify. All right, let's set the table first, as we always do with these, uh, earnings-based big three questions episodes. In Q2 2026, Spotify, uh, total revenue grew [00:03:00] 14% in Q2 year-over-year. That's faster than last Q2's 10. Percent revenue, if you break it down, so they've got premium, which is ad-free, and then, um, ad-supported.

Marcus Johnson: So revenue from premium, the ad-free people, grew 15%, up from 12 last Q2, so a bit better. Revenue from ad-supported users ticked up 1%. Last Q2, it was, uh, negative three, so it's a bit better from, uh, being in the red last time. Uh, Spotify has 777 million monthly active users. They added 16 million in the quarter, roughly on par with last Q2.

Marcus Johnson: So that's how they've been performing. Um, but Daniel, we're here to talk today about big three questions surrounding Spotify. We have more than three. We're gonna come up with a consensus list between us. I'll throw this at you, and this came from... I mean, I went through their financials, so I saw, and I've been tracking it for the last, uh, like the last five quarters.[00:04:00]

Marcus Johnson: You can see that there's a, a problem, a disconnect with, with the advertising part of the business. But Grace Harmon, um, who's our technology and AI analyst, uh, helped crystallize this. So my question is: why is there a disconnect between Spotify's ad-supported revenue and its ad-supported users? Another question on top of that is can they fix this problem?

Marcus Johnson: So Grace was writing the earnings illustrate a disconnect where engagement remains healthy, but new subscriptions are slowing and advertising remains uneven. That raises questions about whether Spotify can translate user interest into advertising performance, particularly as marketers seek clear return on ad spend across channels.

Marcus Johnson: And so what she's talking about here is over the last five quarters, as I mentioned, Spotify has grown its ad-supported user base from 420 million to 490 million users. Yet over that same period, ad-supported revenue has declined year-over-year in four of the five quarters and grew just 1% in the most recent one

Daniel Konstantinovic: [00:05:00] Spotify's been under pressure to- from investors to increase its ad revenues for feels like years at this point.

Daniel Konstantinovic: Mm-hmm. And it's never really been able to do it meaningfully. Like you said, there have been declines. 1% growth is, you know, almost none at all. We've seen other, you know, video streaming services increase the price of, uh, ad-free subscription tiers, and then consumers, you know, decide if they wanna stay at that higher price or go down to the ad-supported tier, and that has worked to drive subscribers there.

Daniel Konstantinovic: I don't know if the same model works for Spotify. I feel like this is vibes-based, but if you are a subscriber and you have got used to listening to audio without ad breaks, I think perhaps you're less, uh, in- you're less likely to- Yeah ... go back to ad-supported listening. I think another aspect of it m- might be that, uh, the ad-supported listeners, the free tier listeners, are just not e- [00:06:00] as engaged as the premium listeners, uh, maybe because of the advertising interruptions or because of, um, whatever other premium features they may be listen, um, uh, missing out on.

Daniel Konstantinovic: If they're deciding not to pay every month for music and for audio, especially as the prices for it continue to go up, uh, maybe that just means that they feel they aren't engaging with it enough to justify a premium cost, and that- Yeah ... shows up in the lower ad revenues.

Marcus Johnson: Yeah. We've seen a disconnect in the amount of time people spend with digital audio and the amount of ad dollars that go there, um, if zooming out from a Spotify.

Marcus Johnson: So, uh, it, I th- um, the exact numbers escape me, but I- it's something to, like, multiples of, like, four or five times the amount of time versus the ad dollars. So it's not just Spotify that's struggling to, to figure this out, but as the leader in the space and somewhat of a bellwether for the space, uh, they definitely have the spotlight on them.

Marcus Johnson: What other questions do we have for [00:07:00] the company at the moment?

Daniel Konstantinovic: Um, I have another ad-related one, which is- Oh,

Marcus Johnson: okay ...

Daniel Konstantinovic: you know, in previous quarters, I feel like we've asked, "What can it do to increase ad revenues?" At this point, my question is, can it become a major ad player at all on, uh, the level that other, uh, media and advertising, um, services are?

Daniel Konstantinovic: Uh, you know, we talked about total revenue growth of 14%. That's still very healthy. That's mostly the subscription business. You know, there may be pressure from investors to really crank up the advertising because they've seen it, you know, go to the moon at other companies. But seems like Spotify can kind of comfortably sit at- Its current rate of growth, uh, with subscriptions and not really worry too much about ad revenues, even if it's not gonna help them grow at the rate that, you know, investors speculate that they could.

Daniel Konstantinovic: Mm-hmm.

Marcus Johnson: Mm-hmm.

Daniel Konstantinovic: Um, and because of [00:08:00] the, you know, such tepid and like back and forth ad growth, I wonder if it's like, if it's ever going to get on that level.

Marcus Johnson: Yeah. I wonder also if it needs to. Yeah. It's- Because advertising isn't a big part of their b- it's like about 10% of their business and has been for years.

Marcus Johnson: And so whilst it's nice to try to grow that part of your business, you could also argue that because of they might make some Premium revenue, it doesn't have to. Now, you could also argue that they've been increasing prices and how much more will users tolerate in terms of price increases, um, because that's obviously one way to juice the, uh, the Premium revenue side, um, before you start to see churn or some kind of pushback from, from listeners.

Marcus Johnson: But up until now, they make 90% of their business from Premium, and so th- there's not as much of a need as some companies that rely, uh, significantly, uh, more on advertising.

Daniel Konstantinovic: Yeah, definitely. Yeah. Um, yeah, it's interesting that y- you know, the pressure to increase the ad [00:09:00] revenues persists when seems like e- either they can't figure it out or maybe the juice there just isn't worth the squeeze.

Marcus Johnson: Yeah. Um, so some other questions I had. One was about, like, well, are there kind of other revenue streams that they could lean on? Uh, one was can Spotify generate meaningful supplementary revenue from something like its new reserved ticketing service, uh, in partnership with Live Nation? So fan- fans who must be, uh, they have to be Premium subscribers.

Marcus Johnson: Uh, they'll get selected based on factors like how much they stream and share an artist's music within an app. So super fans, you could say, they would get the chance to buy tickets to a concert before other people, uh, before general admission. Um, maybe getting two of them reserved just for them to buy within 24 hours before they're given up to the general public.

Marcus Johnson: Um, I'm surprised that Spotify hasn't had deeper integrations with regards to ticketing [00:10:00] for concerts or merch. Uh, and so I wonder if this could maybe be a, a, a stepping stone towards that.

Daniel Konstantinovic: Yeah, I mean, it definitely seems like they're trying to find new avenues, uh, to get premium users to spend more since those are the only consumers- Mm-hmm

Daniel Konstantinovic: spending on Spotify.

Marcus Johnson: Yeah.

Daniel Konstantinovic: But, you know, I, I wonder if the, the value proposition is just off. I mean, if you're paying-

Marcus Johnson: Mm ...

Daniel Konstantinovic: $12 a month for Spotify Premium over, you know, 12 months a year, how many live shows is the average Spotify listener really going to? Interesting. And if they're listening to, like, the top, top artists on Spotify, the most popular ones, which I assume, uh, which, you know, it seems safe to assume that a lot of them are-

Marcus Johnson: Mm-hmm

Daniel Konstantinovic: those tickets are very, very expensive. So is the chance to buy a super costly ticket early for, you know, $144 a year really that [00:11:00] appealing to people? Um, and I mean, my live music habits are certainly not, uh, representative of probably the majority of Spotify listeners, but I go to a lot of live music.

Daniel Konstantinovic: Mm-hmm. And-

Marcus Johnson: Mm

Daniel Konstantinovic: I feel like it, it's cheaper to just go direct to, you know, the band or artist or local venue- Yeah ... that is selling the ticket than to do it through this. Like, I am not going to shows where being able to buy early is even something to worry about.

Marcus Johnson: Right. I wonder if this could tie into that.

Marcus Johnson: So Sarah Fisher of Axios was noting that the two co-CEOs for, for Spotify, uh, Gustav Söderström and Alex, uh, Nordström, uh, introducing four- uh, well, I, I guess four big ideas to drive the company's growth around its, uh, taste advantage. One of them was this tiered, uh, revenue products. Spotify building its platform around a wider set of high-margin products instead of just focusing on premium and free.

Marcus Johnson: And so is there another tier? We talked about the [00:12:00] lossless, right, the higher quality audio tier that we've, you know, they've been, um, thinking about forever. I wonder if there's a, the kind of super fan tier where those perks would mean more to you because you do go to multiple concerts. 'Cause you're right, I don't think the average-

Daniel Konstantinovic: Yeah

Marcus Johnson: person is going-

Daniel Konstantinovic: Well, they've- ... to make the most out of it ... they've added the, uh, high-definition audio, and there was speculation for months and months that when they added the- Oh, to premium? Yeah. Wow. To premium. Um, there was s- uh, speculation that it would be at a higher cost, but when every other platform has that at, at a base subscription- Yeah

Daniel Konstantinovic: I think Spotify got a little worried about if they came in at $2 more a month for hi-fi audio when the competition's not doing.

Marcus Johnson: Yeah.

Daniel Konstantinovic: Uh, so, you know, I don't know what that's reflective of in the, uh, bigger picture, but it's an interesting, uh, moment, I guess.

Marcus Johnson: Yeah. So I got another one for you. Um, this one I guess is linked to advertising.

Marcus Johnson: Uh, d- does, um, podcast advertising, um, it, it, well, actually, the, is, is podcast [00:13:00] advertising primed for another wave of growth, uh, for Spotify? So Spotify's poured over a billion dollars into podcast business. Uh, Roman Wassermiller, uh, VP and Global Head of Podcasts, was talking to Axios, saying that he believes podcasts will eventually drive 40%, 4-0 percent, margins for, uh, from ads.

Marcus Johnson: So the problem, Danny, with podcasts, with podcast land, is that people listen to Joe Rogan or SmartLess or Crime Junkie, and they think that because they have millions of listeners, every podcast audience is that big. The average podcast, according to Buzzsprout, which is one of the- Maybe two or three biggest podcast publishing platforms.

Marcus Johnson: Uh, the average podcast gets 27 listens in the first week.

Daniel Konstantinovic: Wow.

Marcus Johnson: So if your podcast gets more than 27 listens in the first week, you are in the top 50% of all podcasts in the world. If you get 100 people listening or 100 total listens to your podcast in the first week, you're in the top [00:14:00] 25% of all podcasts on the planet.

Marcus Johnson: If you get 400 in the first week, you're in the top 10%- Hm ... of all podcasts in the world. And these so, and also these seemingly kind of small audiences have fervently engaged loyal listeners, um, that really value their host's opinion. Uh, this, people can see this chart on the screen. Weekly podcast listeners finding podcast hosts twice as important as social media influencers, uh, according to Cumulus Media and Signal Hill Insights.

Marcus Johnson: You got some other data here. 67% of global listeners have made a purchase directly because of a podcaster, while 85% have taken brand action after listening to a podcast according to, to Acast. And so our analyst Mar- Marissa Jones writing, "Podcasts are emerging as an essential investment in a crowded digital marketing ecosystem for the ability to engage consumers and drive trust."

Marcus Johnson: They're not going to reach the millions and millions of people that one podcast like a Joe Rogan Experience can, but I don't know if they need to. And we're seeing a, Daniel, we're seeing a similar migration. The reason this came to mind was they're seeing a [00:15:00] similar migration in social media, in the social media influencer front.

Marcus Johnson: From 2021 to today, so in the last five years, the share of influencers classed as nano, nano influencers, people with 1,000 to 5,000 followers, has gone from 3% to 20%. So it's exploded. It was basically almost no influencers, and now it's most in terms of, um, where a lot of the money is going, uh, in the- uh, influencer space.

Marcus Johnson: Um, in that same time, mega influencers, the biggest ones, has, has fallen. There's a recent Wall Street Journal article from Katie Dayton which was titled The la- The Latest Darlings of Social Media Marketing: Regular People with 500 Followers. And so I just, I wonder if podcasts will get that second wave of they have smaller audiences, but they're incredibly engaged.

Marcus Johnson: It's a more affordable form of advertising as costs rise. It's a very brand-safe form of advertising. There was some data from Sounds Profitable and Signal Hill Insight saying podcasts were factual and accurate, [00:16:00] um, more so than social media platforms. Um, and they also have the least annoying ads. Uh, you can see from this chart on the screen, just 25% of US adults considering podcast advertising annoying, far less than the rates of online display ads, 50% YouTube, 46%, uh, streaming 42 according to YouGov.

Marcus Johnson: So I do wonder if there's gonna be the second wave or third wave or whatever wave of podcast advertising to help Spotify. What do you make of that take?

Daniel Konstantinovic: Um, I think it's interesting. The, the nano influr- nano influencer comparison, um, is something I hadn't really thought of before. Uh, it's definitely true.

Daniel Konstantinovic: You know, I can understand why a specific brand would reach out to an influ- like, you know, a woodworking brand, I don't know, Home Depot or whatever- Mm-hmm ... would go to a, a DIY influencer with 1,000 followers over, you know- A celebrity ... I

Marcus Johnson: don't know, Charli

Daniel Konstantinovic: D'Amelio- Yeah ... which is, like, a very dated, uh-

Daniel Konstantinovic: influencer reference at this point. Um, or maybe not. She's still out there. I have no idea. I think she's still out there. Yeah. Yeah. [00:17:00] She's, she's still kicking. Sorry, Charli. Yeah. Um, that is interesting. I, I also feel like w- there are two kinds of podcast ads that- And, and I feel like the, the difference between them doesn't really get highlighted very much.

Daniel Konstantinovic: There are the host ad reads, uh, that, you know, even those get, like, cycled in and out. You know, if you listen to the, uh, d- if you listen to a new episode of a show the week it releases and then come back to it six months later, you know, those ad breaks might have a different sponsor now. Um, and they are dynamic, which I think adds to the value, and they also have that consumer trust because, uh, the consumers like the podcast hosts.

Daniel Konstantinovic: Um, they like you, Marcus. Come on. But then there is, uh, the ads that Spotify handles themselves. Spotify is not going into, you know, Mike Birbiglia's podcast and striking a deal between, uh, a Zo- [00:18:00] uh, what's the name of that sock company? Whatever. One of those brands that you always hear in podcast ads all the time.

Daniel Konstantinovic: Mm-hmm, mm-hmm. Um, and that show. That's something that the podcast either is doing itself or that the distributor is doing, which I guess could be Spotify in the case of, you know, The Joe Rogan Experience or some other show that it, uh, has the specific license to. But Spotify doesn't get a slice of that, and what it does get is, uh, s- ads that function similarly to how they, uh, function when you're listening to music on Spotify, and those, I think, probably have a much lower, uh, engagement rate or consumer sentiment or consumer trust than the ones that you just hear, you know- Mm-hmm

Daniel Konstantinovic: embedded in the podcast themselves naturally- That's a good point. Mm-hmm ... 'cause they don't have the host reading them. They are just interjections. Um, so that market, you know, is not as enticing perhaps for the big spenders, uh, and it doesn't have all those benefits that we talk about when we say, you know, podcast ads are huge for consumer trust.

Marcus Johnson: Uh, all right, fella. [00:19:00] Um, anymore for Spotify?

Daniel Konstantinovic: Yeah. Um, I'm curious about what Spotify's video projects are accomplishing, if anything. Um-

Marcus Johnson: Hmm ...

Daniel Konstantinovic: this has been a big push that Spotify has focused on k- uh, alongside AI in the last two years. There's music videos, video podcasts, but what are they accomplishing really?

Daniel Konstantinovic: Because the ad revenue is not ticking up, which suggests that they're not getting more money from the ad space. Maybe it's increasing, uh, subscriber time spent, which reduces churn, I suppose, but again, doesn't really attract that many new subscribers when YouTube is right there, uh, and doesn't do anything, uh, to boost revenues.

Daniel Konstantinovic: So- Just seems like, uh, it, it's kind of landed with a thud. It isn't doing all that much Mm-hmm.

Marcus Johnson: Yeah. It's a fair one. Um, I've got one more as well to, to close this out. This is the, the, uh, based on the AI effort. Sarah Fisher of Axios noting Spotify announced a landmark deal with Universal [00:20:00] Music Group to create a new tool that allows fans to create covers and remixes of their favorite songs from participating artists and songwriters.

Marcus Johnson: Seems like Spotify's taking the approach that AI is going to be on the platform. We'd rather it be with the artist's consent to use it to remix their material versus kind of AI slop just flooding the platform. Anyway, Sarah Perez of TechCrunch writing, "AI music has flooded streaming services." She says French music streaming- streamer Deezer recently noted that more than 50%, half, of daily track uploads were generated with AI, up from 10% a year and a half ago.

Marcus Johnson: Thoughts on this one?

Daniel Konstantinovic: I mean, my follow-up question would be is that not still AI slop? Like, just because, you know, you can generate 500 songs with Charlie Puth singing about whatever, that's pretty low-quality content. Mm-hmm. Uh, is that not [00:21:00] cluttering things? Is that not diluting what's available on Spotify just 'cause it's a partnership with the label?

Marcus Johnson: Great question. Yeah. An incredibly fair point. Uh, all right, Danny, let's pick a top three consensus between the two of us. I'll let you go first. Which one do you think is the biggest question for Spotify?

Daniel Konstantinovic: Um, you know, I'm partial to my own, uh, which is- Totally ... will Spotify ever become a prominent ad player?

Marcus Johnson: Okay. Nice. I'll go with- I'll go with podcast advertising. I find it fascinating- Mm ... just because of the, like, the amount of time p- podcast listeners, I mean, it's like an hour a day podcast listeners spend with the medium. Um, they're incredibly engaged. They seem to be one of the most advertiser-friendly audiences a- available, and yet the dollars just aren't matching up with the, with the time and the engagement.

Marcus Johnson: So I think that's a, that's an interesting one to keep, especially as, uh, the VP of global, uh, VP and global head of podcasts talking about, uh, 40% margins from podcast ads. All right, uh, Danny, [00:22:00] what do you wanna pick as our, uh, third one?

Daniel Konstantinovic: Uh, if the video initiatives at Spotify are really accomplishing anything at all.

Marcus Johnson: Yeah.

Daniel Konstantinovic: Uh, it has been such a big focus of their messaging in-app and to investors, but for what gains?

Marcus Johnson: Yeah. Very good. That's our top three big questions for Spotify at the moment. That's all we've got time for for today's episode. Danny, thank you so much for hanging out with me today and putting the list together.

Daniel Konstantinovic: Yeah, always a pleasure.

Marcus Johnson: Yes, sir. Thank you to another Danny, Danny C., uh, who runs video for us here at EMARKETER. Thanks to everyone for listening to Behind the Numbers: EMARKETER Podcast, made possible by Awin. Suzy will be here Wednesday talking to Colgate-Palmolive. Uh, and on Thursday I'll have our sports marketing podcast discussing advertising alongside the world's most popular sport.

Marcus Johnson: And on Friday, Behind the Numbers is back.